In a significant victory for Napster, the 9th US Circuit Court of Appeal on Friday granted the company's request to delay an order that would have shut down the popular song-sharing site at the stroke of midnight (Pacific Time).

Much to the delight of its fans, a Napster spokeswoman said the company would continue to do business as usual.

In a prepared statement, chief executive Hank Barry thanked Napster users for standing by the company, saying that Napster can help consumers, artists and the music industry.

"New technologies can be a win-win situation if we work together on building new models -- and we at Napster are eager to do so," Barry said.

The appeals court gave Napster until 18 August to explain why an order granted Wednesday by US district judge Marilyn Hall Patel should be permanently overturned. The Recording Industry Association of America (RIAA) sought the injunction, which would have banned trading of major label music, as part of its copyright infringement lawsuit against Napster.

The decision, signed by two judges, could delay for several months the resolution of a bitter feud between the Silicon Valley upstart and the giants of the recording industry, which has charged Napster with allowing wholesale piracy of copyrighted material.

Lead Napster attorney David Boies said the stay would allow the company to resubmit its argument that its users are legally sharing their own property and that Napster itself should not be held responsible.

"The individual user has an absolute right to share music," Boies said on CNNfn. "The problem is the RIAA seems determined to kill this new medium. If that's so, we're not going to go quietly into that night. We're going to fight."

In a statement, RIAA president Hillary Rosen called Friday's decision a disappointment, but said she was confident the recording industry would eventually prevail.

"We look forward to the day when the infringements finally cease," she added.

In its one-page ruling, the appeals court said Napster's attorneys had raised significant, and potentially precedent-setting, questions about the form and merits of Patel's decision.

In its motion for a stay, filed Thursday, the company argued it would have had to lay off employees and shut its site down because it had no way to differentiate trading of major-label songs from trading of songs by independent artists.

In effect, the appeals court said it plans to explore Napster's assertion that Patel's ruling was overly broad.

The court set a 8 September deadline for the RIAA to respond to Napster's brief, and 12 September for a Napster rebuttal. The appeals court will issue a permanent decision sometime after that.

Legal experts said they were surprised by the ruling since appeals courts usually stand by a lower court's ruling in the early stages of a trial.

"I'm actually really pleased to see that the 9th Circuit is going to take some time and take a look at this, because the issues are so new," James Chadwick, an attorney with Gray Cary Ware & Freidenrich in Palo Alto, California, said.

Still, Chadwick said Napster should be prepared to comply with the court's final ruling, even if that means finding a way to easily separate out the major label music.

"If I got hit with a bullet once, I'd be wearing a bullet-proof vest from here on out," Chadwick said.

Curtis Karnow, with Sonnenschein, Nath & Rosenthal in San Francisco, agreed that Napster should proceed cautiously.

"Napster is not in contempt of court, so they can go ahead and act as if Judge Patel had never issued the order," Karnow said. "However, they know that this is only a temporary reprieve."

Mark Radcliffe, also an attorney at Gray Cary, said the ruling could be a boon to other cases, particularly those filed in California, such as copyright infringement lawsuits filed against Napster by the heavy metal band Metallica and rapper Dr Dre.

Because appeals in those cases would also go before the 9th Circuit, "it means the Los Angeles court has to be very careful about coming to an alternative conclusion," Radcliffe said.

Dan Rodrigues, president of Scour, a file-swapping service that's also the target of a similar RIAA suit, said his legal team is still reviewing how the recent Napster ruling affects his case.

"We're generally pleased," he said, that the appeals court sided with Napster. "I think the court should uphold that user-to-user exchange of files over the Internet is legal."

The case has exposed the problems in applying traditional copyright law to services like Napster, which enable the online trading of MP3s, small computer files containing CD tracks that are easily swapped over the Internet.

It also marks one of the first major skirmishes over a technology that is expanding rapidly. The Motion Picture Association of America is locked in its own Napster-like battle against Scour. and other companies that provide film and video over the Internet, while other software services that specialise in digitally storing and transferring all forms of intellectual property are proliferating.

Opening the legal defence for these companies, Napster said its members do not violate copyrights because their trades were all for personal, noncommercial use as defined by the Audio Home Recording Act of 1992. It also said that, because some of the files Napster users trade are not protected by copyright, it was being unfairly required to alter technology that had a legitimate purpose.

Patel, in her decision Wednesday, disagreed, saying that Napster was clearly set up to enable users to evade paying fees for copyrighted material.

The clash has shaken the multi-billion dollar recording industry and split the artistic community, with some artists accusing Napster of promoting theft while other groups say it is simply broadening the popularity of their music.

Following Patel's ruling, online activists took to the Web. Some launched protest sites urging the boycott of the RIAA, which represents major labels including Time Warner's Warner Brothers music group, Sony's Sony Music, Seagram's Universal Music Group, Bertelsmann's BMG and EMI Group.

Others swamped other free music-swapping sites, checking out their alternatives in case Napster shut down. And many hit Napster, hoping to download as much music as possible in case the site closed.

The RIAA site was down Thursday morning, presumably after hackers attacked the site. The free-music controversy has ignited a storm of hacktivism. When Metallica sued Napster for copyright infringement earlier this year, hackers vandalised the band's site, posting the words "Leave Napster alone."

Meanwhile, at least one music-swapping site has folded under the threat of RIAA litigation. Globalscape, which is part of a publicly traded company, plans to unplug its CuteMX file swapping service while it explores the recent court proceedings.

Reuters contributed to this report

Steven Vaughan-Nichols loves music and Napster, but he still condemns its usage, but not necessarily for the reasons you think. He says the benefits of Napster may outweigh the risk... for your home machine, but for the corporate network, though, the time to stop playing with Napster and its cousins is now. Go to AnchorDesk UK for the news comment.

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